Wednesday, November 28, 2018

Wow, the Federal Reserve Board appears to be confirming that is set to crash the markets.The Fed just issued an unusual warning about current market prices.CNBC reports:

In what is often a boiler plate report on conditions in the banking system and corporate and business debt, the Fed instead warned of "generally elevated" asset prices that "appear high relative to their historical ranges."

In addition, the central bank said ongoing trade tensions, which are running high between the U.S. and China, coupled with an uncertain geopolitical environment could combine with the high asset prices to provide a notable shock.

"An escalation in trade tensions, geopolitical uncertainty, or other adverse shocks could lead to a decline in investor appetite for risks in general," the report said. "The resulting drop in asset prices might be particularly large, given that valuations appear elevated relative to historical levels."

The drop in asset prices would make it more difficult for companies to get funding, "putting pressure on a sector where leverage is already high," the report said.

The report further noted that the Fed's own rate hikes could pose a threat.

That market prices are in crash mode should not be a surprise.This is what I wrote in the EPJ Dail Alert on Friday October 5 (red highlight in original) within days of the stock market top:

SELL SHORT!The odds of the economy and stock market chugging along without a significant break are very low.

Money supply growth just does not appear strong enough to sustain the stock market strength and general overall strong economic numbers.The foundational current weakness in the stock market is likely the current sluggishmoney supply growth. It suggests at a minimum a very dangerous period ahead forthe general stock market....with the present stock market weakness in a sluggish money supply environment, I expect it to get much more serious on the downside.

I am now advising short-term aggressive risk-oriented traders to go short the general market.

But it is unusual for the Fed to put out such a stark warning.But their warnings remain behind the curve. In the EPJ Dail Alert, I am now warning that a recession is very likely in 2019..-RWg